TORONTO - The federal government has no plans to offer a more robust vehicle scrappage program in Canada, The Canadian Press has learned.
Environment Minister Jim Prentice spent the summer reviewing the current program, which offers $300 in cash or other small incentives to get older polluting vehicles off the road, and decided no changes were necessary, Prentice said in an interview late Thursday.
The decision not to enhance the current system in Canada comes less than two weeks after the so-called "Cash for Clunkers" program was wound down in the United States.
The resounding success of the U.S. program, which offered consumers up to US$4,500 to trade in old vehicles for new, more fuel-efficient models, provided an undeniable boost to vehicle sales and forced the government to commit $2 billion above the $1 billion it had initially earmarked.
However, critics of the U.S. program and similar incentives in some European countries have said scrappage programs only serve to push vehicle sales forward and will result in even sharper declines down the road. It has also been criticized for boosting sales of Japanese and Korean vehicles while leaving most North American-produced models in the dust.
"There of course has been quite a controversy about whether these programs are resulting in any new vehicle sales or whether they're simply accelerating vehicle sales people were going to make at some point in any event," Prentice told The Canadian Press.
It remains to be seen whether this will be the case in the U.S., where August vehicle sales increased by one per cent year over year, compared to months of steep declines experienced previously.
In Canada, total August vehicles sales fell 7.9 per cent in August compared to a year earlier.
However, Prentice said the program was never intended to boost the struggling auto industry, but was rather meant to get old, polluting vehicles off the road and help reduce tailpipe emissions.
"It was never intended as an economic stimulus measure. It was intended to have environmental objectives," he said.
Hyundai Canada, Chrysler Canada and Ford Canada have already begun offering their own scrappage incentives, and Prentice said he feels confident the marketplace will find its own solutions to the slump in auto sales.
"I think it's clear that the auto companies are implementing these kinds of programs at this point on their own," he said.
The government is also concerned about its ballooning deficit, which is projected to surpass $50 billion this fiscal year. Ottawa is likely trying to avoid spending more money on an industry which has already received billions of dollars in government bailouts.
Prentice said $62 million remains of the $92 million originally earmarked for the vehicle replacement program and it is well on track to achieve its objective of taking between 100,000 and 200,000 older vehicles off Canada's roads.
"We will watch the program through this fiscal year and next, and then evaluate whether it should be carried forward beyond that," he said.
"My understanding is that by the end of this fiscal year, based on current projections we will have achieved over 100,000 vehicle reductions and that's within the range we had set."
Under Canada's so-called "Retire Your Ride" program, consumers can receive free transit passes, membership in a car-sharing program, money towards a new bike, $300 in cash or a $500 rebate on the purchase of a vehicle built in 2004 or later.
However, the incentives vary by province. New Brunswick and Prince Edward Island are the only provinces in which you can get the rebate. If you live in Ontario, Manitoba or Saskatchewan, your only option is the $300 in cash.